I’ll say ‘I told you so’ because I did, both in comments at various sites and in “The Lurio Report.” While all the space fans were looking forward to SLS being killed by sequestration, I was warning that it would likely be the last thing cut. You got to get the concept- the only thing important to Congress is buying votes with pork now, not getting actual results from space. If they get both, then those of us interested in the latter too often get wide-eyed happy and forget the absolute primacy of the former.

Two things: 1.) The “sequestration” is a reduction in the amount of growth. Instead of getting 11% more money than they got last year, it will only be 8%. The whole “cut” thing is laughable.
2.) Bureaucrats always find an item amongst their satrapies that has public support to make an example of, to sobbingly terminate as an example of the hardships they are forced to endure. All crap, as usual. Killing CCDev while continuing to support the Senate Launch System bloatware is quite possibly the finest example of this to date. Not only do they get to a.) Show off how this “sequestration” is forcing them to “make the tough choices” to the drooling Obama-voters b.) Get rid of a bunch of people who were producing results at a fraction of NASA costs, and thus making the bureaucrats look really, really bad, and c.) Get back to business as usual.

A great deal more could be accomplished with a suitably tall tree, and some rope. But, I digress…

This is completely nuts. The only people benefiting from this will be the Russians which will keep their monopoly on ISS transport.
It was afraid of something like this happening. SpaceX is in a growth phase to meet the agree upon objectives and moves like this could easily kill the company.

Yes, it could be a very good learning experience for them, both teaching them why the existing aerospace firms insist on cost-plus contracts from NASA and why true commercial firms avoid putting government contracts in their critical path for new products.

SpaceX has a lot on the their wish list, but NASA funding IS driving Dragon as this point. Why do you think Dragon Lab is on the waiting list? I am surprised you are so ignorant of their history and the economics factors which are driving it.

[[[It will cost a billion dollars to get manned spaceflight off the ground, Musk says. The NASA award covers half of that, so SpaceX will still be contributing hundreds of millions of dollars to its own cause. “This award takes us pretty far,” he says. “It takes human beings into orbit, which is pretty good.” NASA certainly hopes Musk gets there fast, since it currently has no way to transport astronauts other than Russia’s hardy old Soyuz. “Soyuz is a good system but they are charging over 63 million a seat,” Musk says.]]]

While it is true that the launchers can be easily repurposed for launching commercial payloads since the launch vehicle is the same, the work being done on Dragon and the escape system is not, nor are the manufacturing requirements the same. i.e. it could be that SpaceX has increased their fixed costs to cope with production levels which will end up not being required and there will be a need for a corporate downsizing. Looking at their launch manifest for 2013 nearly half of their flights are quite likely government funded. Then there is the Falcon 9 Heavy Demo Flight which is coming out of their own pocket. So this could seriously impact their cash flow.

Should NASA vanish entirely – which is not going too happen – SpaceX’s manifest would drop from it’s current 40+ manifested flights to just 30+. A still very healthy business.
However NASA is not going away and the CRS flights will stay on the manifest.
The worst that can happen is a slowdown in the development of crewed Dragon. However SpaceX is ahead of the curve in it’s current development. It currently expects dragon’s first crewed flight in 2015. NASA currently wants crew starting in 2017, so a little delay won’t hurt NASA.
Annoy Musk? Yes.
Delay things dramatically? No.
Force a downselect? Unlikely.
A more serious effect is the stretching out of SLS somewhat. A year or two slip. Something the critics of SLS have always said would happen.